Build Predictable Cash Flow with Smart Real Estate

The Real Estate Investing Club

Join an active community of RE investors here: https://linktr.ee/gabepetersen  0:00 Introduction & Friday Energy 1:12 Mike’s Journey from Tech to Real Estate 3:45 Discovering Passive Investing & Burnout Shift 6:10 Why Financial Freedom Means Time Freedom 8:05 Lessons from the 2009 Market Crash 10:30 Why Multifamily Struggled Recently 13:05 Industrial & Retail Investing Explained 16:20 Long-Term Leases vs Short-Term Risk 19:10 Predictable Cash Flow Strategy 22:05 Investment Mindset & Risk Quadrants 25:40 Book Insights & Learning Framework 28:15 Final Advice for New Investors  REAL ESTATE INVESTING STRATEGIES FOR LONG-TERM FINANCIAL FREEDOM 💰 In this episode of The Real Estate Investing Club, I sit down with Mike Zlotnik to break down powerful real estate investing strategies that focus on predictable cash flow, passive income, and long-term wealth building. If you're looking to achieve financial freedom through real estate investing, this conversation dives deep into the mindset, asset classes, and decision-making frameworks that separate successful investors from the rest.  FROM TECH CAREER TO PASSIVE INCOME INVESTING 🚀 Mike shares his journey from a high-pressure tech career into full-time real estate investing, highlighting how burnout and the desire for time freedom led him to pursue passive income through real estate. We explore how early investments in multifamily properties revealed key lessons about appreciation vs cash flow, and why transitioning into more stable investment strategies became essential.  WHY INDUSTRIAL AND RETAIL REAL ESTATE ARE WINNING 📈 We discuss why industrial real estate and open-air retail have become top-performing asset classes in today’s market. With long-term leases, strong tenants, and triple net structures, these investments offer consistent income and reduced volatility. Learn how lease duration directly impacts risk, and why predictable income streams are crucial for passive investors seeking stability.  AVOIDING COMMON REAL ESTATE INVESTING MISTAKES ⚠️ One of the biggest takeaways from this episode is the importance of buying right and maintaining conservative underwriting. We break down how overleveraging, variable interest rates, and aggressive assumptions led to major losses in multifamily investments. Discover how to protect your downside, build margin of safety, and avoid costly mistakes in volatile markets.  #RealEstateInvesting #PassiveIncome #FinancialFreedom #RealEstatePodcast #WealthBuilding  Want to learn more about our guest? Connect here: tempofunding.com  Want to learn more about the REI Club Podcast, how to invest with Gabe at Kaizen, or join our community of active real estate investors on Skool? Visit the podcast website at https://www.therealestateinvestingclub.com or click here: https://linktr.ee/gabepetersen

Transcript

00:05all right we are back with another episode of the real estate investing club i hope you guys are

00:10having a great day great week wherever you are and whatever day it is for you it is friday on

00:16the podcast so we're bringing that good friday energy to you it is mid-february here in seattle

00:21so we do have clouds unfortunately but like you guys know from the last episode i just got back

00:27from sunny california we went to disneyland with my three-year-old daughter it was the best time ever

00:32it is uh disneyland you know last time i was there was probably 20 years ago i was in high

00:36school and

00:37it's not there's nothing like disneyland looking through the eyes of a toddler they absolutely

00:42love it i had a blast so i'm super excited to jump back into it though because we got mike

00:46zlotnick with us on the show mike is from temple funding he does a ton of stuff if you uh

00:53if you

00:53can think about it he probably does it but right now he's focused on industrial and open air retail

00:58i am super excited to jump into this mike thanks for hopping on okay thank you kindly for having me

01:03and uh we'll get excited about disney and you are you are in the uh uh seattle tacoma area and

01:12i'm in

01:13brooklyn new york and you you know we'll complain about the weather we just had that massive blizzard

01:18and it's been uh not exactly fun but uh it's part of part of life of uh living in the

01:24uh northern

01:25parts of the country yeah yeah i mean the summer here in seattle you can't beat it but when we

01:30went down to disneyland it was actually um it was raining the first day and we were like oh no

01:35we

01:35brought seattle with us but the next day it was sunny so we were we were all good um mike

01:40i told you

01:41before we got on here we always like to start with stories we like to hear how people got to

01:45where

01:45they are so why don't you take us to the beginning of your story in real estate and just uh

01:49tell us

01:50how you got here so you see my cub buffalo bills uh congratulations by the way to uh seattle for

01:57winning a super bowl so i i come originally from the former soviet union i immigrated in 1989

02:03i was 18 years of age um i grew up playing chess and being a math wizard came to the

02:10united states

02:10political refugee i became u.s citizen u.s patriot i settled upstate new york actually in uh rochester

02:16new york and that's how i became buffalo bills fan just kind of upstate new york nice but to make

02:23a

02:23long story short i i uh being uh you know a chess master and a math wizard i studied uh

02:29math and

02:30computer science uh here uh upstate new york and basically went into the technology world i spent almost

02:3715 years um as a you know rank and file tech guy all the way to a vp of corporate

02:43vp uh running

02:44multiple departments had a great career really enjoyed it but also discovered passive real estate

02:50investing in 2000 uh bought my first apartment in brooklyn new york and uh continued to buy some

02:59apartments and some multi-family uh homes here in in brooklyn all local all near uh where i live and

03:06discovered appreciation but no cash flow so um and it took me only 90 years to be a passive investor

03:14to get to the point that i wanted to uh take the leap and be done with the uh technology

03:21career

03:22and i was getting a little burned out for those who are in the tech world can appreciate midnight

03:27deployments and things that have to be up and running the software has to be perfect but by

03:32the you know 7 a.m clients come on on board so all that experience was a little bit of

03:38a burnout

03:39and i was delighted to uh jump to real estate full-time was my passion i really loved real

03:45estate and uh it was right after gfc 2009 and there were all kinds of interesting opportunities

03:52and uh that's kind of how tempo funding was uh born um started financing short sale flips if you

04:00were those days in residential real estate ton of uh properties needed uh there were a ton of

04:06inventory deep discounts you could buy phenomenal deals and a lot of people that we kind of knew

04:13needed capital to finance you could buy you know take a property to be worth a million dollars now it's

04:20worth 500 000 and the bank loan is 700 000 and was a short sale and they would buy it

04:27for

04:28450 and flip it for 500 to a retail buyer they needed the 450 to finance their short sale purchase

04:34and then immediately flip so we start funding flips and then start finding hard money loans and sort of

04:40the journey continued from there into commercial real estate over the years but i'm going to stop

04:44for a second um and just about a little couple of words about my family i live in brooklyn new

04:49york

04:50and married to my wonderful wife for many many years we have four monkeys and a cat for human monkeys

04:57nice and a real cat nice well i love it that sounds like um it's funny that you mentioned you

05:04kind of

05:05got burned out in the it world i actually i got started in uh in consulting and and we did

05:09those

05:09midnight releases and that is uh it is a rough world and so i understand why you'd want to jump

05:16into real

05:16estate from that um so you freedom of time that was the freedom of time requirement financial freedom

05:23i was almost there already but the freedom of time to do things normal hours and let the money work

05:30for

05:30you at night not worry about the software deployment calls that was the transition that is a key like

05:36we all have a why right my why is to empower investors to achieve financial and freedom of time

05:43through uh passive real estate yeah it takes a leap of faith to to make the jump it's not easy

05:49because you get used to it when people talk about financial freedom freedom i feel like that is the

05:55type of freedom that they're actually talking about is just the freedom to choose who what and when uh

06:01they actually you know engage in work nobody wants to stop working they don't you know people might

06:06think they might romanticize the idea of not working but that's not really what you want to do you want

06:11to

06:11work work is fun uh you just want to be able to choose when you do it why you where

06:15you do it and uh who

06:16you do it with and so um yeah i totally understand that so you after um after the the 2009

06:24crisis you guys

06:25got into you got into real estate pretty deep you started funding deals but then you started buying deals

06:31again you started getting onto the kind of the gp side um you've up to now you've got uh you

06:36guys are

06:37focused on industrial and open air retail why is it that you chose those two asset classes

06:43we've sure done a bunch of other things too so but those are the the darlings we love today

06:47so we've done uh open air retail and industrial all the way down back to 2017 but we've also done

06:55multifamily storage other projects i'll just tell you many of us have seen what what has happened to

07:03multifamily uh through the uh higher for longer interest rates and and and that reset so it or

07:10caps those just insanely low cap rates it was a darling of commercial investing and it got devastated

07:17so uh you know it's a battlefield now for many of these deals to survive and uh we continue to

07:25do

07:25actually reasonably you know reasonably hard work to try to make sure these deals survive and

07:32ultimately hopefully thrive but some of them are losses no matter what and what we saw over those

07:40years i kind of pausing there real quick some of you said some of them are lost no matter what

07:45and

07:45the reason a deal is the only reason a deal is ever lost is because you didn't buy right and

07:50so i just

07:50want to pause on that because uh you know these people and i'm not i'm not throwing shade or anything

07:55like that but when you when you buy on variable you know variable rates at some point the the interest

08:00rate can change um or your loan comes due and you're you're projecting for in um for rent increases

08:08that don't actually materialize uh if you're if you're underwriting on such a slim margin such a razor

08:13edge um that's when you get caught so i always you know i always suggest and push people to um

08:20stick to

08:20their underwriting and buy right uh really book in that uh the little bit of cushion that you can get

08:27because um if something you never know what's going to happen in the economy um things can change

08:31on a dime and uh you don't want to be caught in that situation where a lot of multifamily operators

08:36are right now but anyways continue mike yeah so that you you covered a lot of uh key points i

08:42was going

08:42to mention so uh buying in 21 22 market was approaching the peak or at the peak and you either

08:50sit in your hands and you sell everything and you realize you know cyclically at the peak of the market

08:53and the margin uh of these acquisitions was you are you know cost per pound at the peak of the

08:59market

08:59a lot of aggressive assumptions obviously interest rates and floating rate debt so all these projects

09:05got devastated for uh the you know just the financial pressure alone probably hurt uh too many of them

09:11but the the other thing happened is obviously covid you had the uh insurance premiums labor and material

09:18cost spikes and oversupply right of all overbuilt so it was like a perfect storm can it happen yes

09:25and uh kind of lessons learned of course exactly what you said uh buy deep and if if if environment

09:33is

09:33not conducive of buying deep don't do anything like just wait for better timing uh but at the same time

09:40we saw all kinds of success with open air shopping and industrial no supply uh very low leverage conservative

09:48leverage fixed rate debt all these safety elements that you look at and the conclusion from that positive

09:55experience is that let's continue to do what uh is conservative what generates predictable passive income

10:03because um many investors can't tolerate the the pain of loss is just too big most people don't don't take

10:12it very well so how do you avoid uh those situations you you've got to get significantly more conservative

10:19in your investment philosophy that's why we shifted especially in the recent years to industrial open

10:24air shopping although we've done deep value by multifamily at a nine cap purchase about a year ago

10:30uh from a you know distressed seller that had to take a 35 you know haircut uh on a price

10:38market reset that much so when you find these type of situations you can still transact but at the same

10:44time we we've shifted our mindset to focus on predictable safe cash flowing and the other key element

10:55um i i use this approach to thinking about investing so i i basically use lease duration

11:02as a driver of predictability versus volatility it's the best way to think about it so when you have

11:08long-term leases which is very typical in industrial or open-air shopping you know you got a starbucks

11:1410-year lease or you got a cheesecake factory they sign long leases you have a lot more predictability of

11:22the cash flow today and predictability of rent growth and they own triple nets so the tenant pays for all

11:29the

11:29inflation cost inflation which has hit hit us pretty hard so that shift is not just the uh the you

11:38know so

11:42um monthly rents right you go to monthly rents which are uh airbnb which are self-storage

11:51facility there's number of asset classes that live in monthly rents yeah nothing wrong with that when

11:57the market is good you could continue to push rents up but also if the if somebody builds a facility

12:02near

12:03near you and a price war start then you're unfortunately in a bad shape and that's one of the

12:08reasons i love you know i buy self-storage um and i it is an asset class that i will

12:14continue to buy but

12:14right now that's one of the reasons why i i'm not i'm not just finding any i'm just you know

12:19it's not that

12:20i'm not buying it it's just that i'm not finding deals um because most of a lot of self-storage

12:25has

12:26been overbuilt the the net rentable per capita in a lot of areas especially texas where which is where

12:31i like to uh look at are it's just way too high and people have overbuilt um and i've actually

12:36had

12:36it happen to one of my facilities where i bought a facility and then um a new construction went up

12:42literally two miles down the road and you know storage is a three mile radius that you're looking

12:47at when you look for uh for lease ups and so um this shot the the net rentable per capita

12:52up by

12:53i don't know it's like 16 or 17 and so things like that can happen especially with asset classes like

12:58storage where um you have really uh short leases like you mentioned you have a month-long lease

13:03and uh people if something goes up across the street they have huge discounts that you can't

13:07support people just move right over um so i totally understand where you're where you're coming

13:12from when you say you like long leases which is you know industrial retail that makes a lot of sense

13:17yeah yeah thank you you you just covered a critical case of why you know we're a little

13:22nervous about that these short maturity short duration leases then you go to multifamily annual

13:27leases you know and then same issue applies that that you gotta keep re-renting them you gotta

13:33operate the assets heavy operating businesses we want to be investors and to be investors we're

13:37going to these classic long-term leases so you know open-air shopping you can you can have 10-15

13:42year leases uh credit quality tenants and then you go to industrial you can get similar 5-10 year

13:49or you can get longer term i mean we just did a deal uh in newcastle indiana uh it's a

13:54private equity

13:55acquisition of a hundred year old stainless steel company and it's an immediate sale of a real estate

14:02and lease back so what we got is we got uh a private equity uh sponsor who bought the the

14:09business

14:10sold real estate lease back improve their uh return on capital as a result and to us it's a 25

14:16year

14:16fresh lease with the with a wonderful tenant and that's triple net annual rent growth 2.75 fixed rate

14:25that no volatility it's like a clockwork just just like a bond increasing coupon every freaking year

14:30i don't know how else to put it and your your appreciation is forced through the growth of nioi

14:36yeah that's it well if interest rates come down it'll be tailwind to everything including this

14:41asset class if interest rates stay where they are it's fine even if the interest rates increase we

14:45model that you're fine too because it's very predictable yeah and the other beauty and i i think

14:52of it this way going back to storage we can't find any deals either because they trade still at a

14:57negative spread between the cap rate and the interest rate and in industrial and an open-air

15:03shopping we're getting two percent or higher positive spreads yeah which is a margin of safety

15:09and strong cash flow yeah i will uh you mentioned you like uh for industrial retail you like how long

15:16the leases are i will say that um that is one of the reasons why i like mobile home parks

15:20not that

15:20their leases are long but they are incredibly sticky and so once you get a tenant in there they own

15:25that house and uh they're i mean they could move but it'll cost them ten thousand dollars to move

15:30that unit to another part and so generally that though the leases aren't themselves long the

15:36duration of stay is incredibly long um and so i yeah i i get that uh inclination to go towards

15:43just things that don't have a lot of turnover um storage has a ton of turnover it's one of the

15:47reasons

15:48why i'm not super keen on it but i you know i do like storage um it's very easy to

15:52operate

15:53remotely um but it is uh yeah there's definitely downsides to it but i haven't bought industrial yet it

16:00sounds you know triple net everything you just said sounds awesome um especially with a two-point

16:04spread between uh your interest rate and your cap rate um you know if that's if that's what they're

16:09trading at right now that's uh what that's a nine cap isn't it because interest rates are at seven

16:13right now no they're meaningfully better so just give you an example of the deal we did in the

16:18newcastle indiana it's 8.6 uh cap rate and purchase and six and a half fixed rate debt and

16:25our timing was an ideal we were supposed to get 6.3 we we closed and the interest rate was

16:30a bit

16:30higher and now it's come down if we were locking in right now literally a month later a month later

16:35it'd probably be six and a quarter or 6.3 yeah you know a little bit it's really hard to

16:40time out

16:41but you're still very solid shape even at six and a half it's it's a very solid solid shape and

16:47um

16:47yeah so and by the way i heard that on a mobile phone mobile home park people moving the mobile

16:53home is incredibly expensive they're more likely to sell the property right and to move on then you

17:00really don't have to worry about the the the tenant turn around we just got a new owner so i

17:06i absolutely

17:06appreciate that yep um awesome man well hey i just took a peek at the clock we have running down

17:12but

17:12before we move on to the quick question round i do want to ask about the book that you've been

17:16writing you uh you mentioned before that you're kind of gotten all your best ideas and you're

17:22putting it into a book um tell us a few of those ideas and uh and how the book's been

17:26going

17:28sure so uh it's my second book it's only taken me now two and a half three years to finish

17:33this one

17:33and i keep striving for perfection it's super hard and every time i touch it i keep making some some

17:40improvements and modifications and that's by the way one of the key lessons in the book

17:44people have asked how do i get started investing in uh passive real estate or commercial real estate

17:50and i i start ready firing unless you're a sniper you need to go ready aim fire you have one

17:57shot

17:58right as an investor you definitely need the iterative learning process this is two elements

18:04in this so one is ready fire aim very basic lesson where you just um start and you learn from

18:12your

18:12experience one of the most important things is the mindset learner's mindset i love to ask this

18:18question let's say it's a probing question are you investing to to learn or learning to invest

18:23so it's both right so most of you prepare how do you how do you get in commercial real estate

18:28well

18:29you go through a process you you learn about opportunities you learn about diversification

18:33you learn about capital allocation you learn about different strategies mobile home park self-storage

18:38retail industrial all those things uh make a lot of sense you just got to figure out what you like

18:45uh and then the book also talks about uh some very basic concepts i came up with investment quadrants

18:52it's very simple robert kiyosaki has his quadrants i have my quadrants and imagine two dimensions

18:58one is called cash flow dimension and the other one or access cash flow access and then you have the

19:03the uh safety access risk versus high risk versus low risk so if you're looking for cash flow and

19:11higher safety in my methodology and quadrant one if you if you are looking for opportunity growth

19:16ground up development well you're in a quadrant four it's growth and it's a higher level of risk

19:21and every deal falls into one of those four quadrants uh and um the concept is to give people

19:28a very simple tool to look at every deal and to think does it fit my plan so the book

19:34is also

19:34obviously about building your goals first uh obviously risk tolerance your time horizon your

19:42cash flow needs uh liquidity needs a number of other factors so there's that that's an important

19:47question and the other uh the other you know some of the other question other concepts that i'll

19:52mention is you know i talk about uh just like the book sometimes you win sometimes you learn

19:56so if you've you've gone through that experience multifamily you had you know a couple of investment

20:02scars you don't know how things gonna play out don't get discouraged as long as you continue to

20:07diversify yeah if you invested a lot at the wrong time it's incredibly painful i had conversations

20:12with people literally early in the week where i had a discussion with an investor he said

20:16in the last cycle i lost two-thirds of my net worth i had conversations with people who lost 90

20:21percent of the net worth i know people who have done this i don't i'm sure you heard this story

20:27they started had people on every three years yeah so they imagine if you take a million dollars

20:34three years later you have two three years later you have four three years later you have eight

20:38you've done it through the growth through that you know great expansion and that comes 22 and you

20:44want to pay taxes and they've done they rolled all the money in the next set of deals not to

20:49pay taxes

20:50and then the market resets and you know so these things have happened but you you you you gotta

20:56you gotta learn your lessons you gotta continue to to come back to the basics and uh build a strong

21:03foundation and that that's what the book is about it's just to give you a framework and i'm a chess

21:09master so the book is really uses uh applies the learning methodology of how do we learn in chess

21:17and this is a this is a such a typical classic way for people to think about this it is

21:24applicable by

21:24many other investment investment gurus but in chess before you you play the game you study you prepare

21:33for the game to this preparation component and two after the game is over you analyze your game

21:39and then you analyze games of great grandmasters and you learn through that iterative process this is

21:45how you get better what happens in investing exactly the same so i study ben graham warren buffett

21:53charlie monger uh howard marx ray dalio all the the classics so i use many of their wisdoms as part

22:01of

22:01the book quoting them of course but these are such a simple fundamental lessons and when you look at real

22:08estate most of the fortunes well until you had the ai boom or crypto boom were built slowly predictably

22:15over time in real estate right of course you could build fortunes fast through crypto or through ai uh

22:22uh that's a lot of it is speculation if you're right that's wonderful but that's not investing

22:27that is speculation and sometimes people say but it's better be lucky than good i say you know it's

22:34better be you got to get good and if you're lucky on top of that that's wonderful nice uh awesome

22:41so if

22:42people want to get involved in this book how do they how do they find it so we people can

22:47sign up

22:48for um early get a cut get any copy once it comes out it's going to come out fairly soon

22:53it's on uh our podcast website so people call me big mike from a long time and i'm a fund

22:59manager

22:59so the website is big mike fund dot com and they can sign up i like to correct this joke

23:07a little

23:08cheesy but it'd be easy to remember if you can't remember that big mike fund dot com is a shorter

23:12version of it right people have actually misheard me and i said big mike fund dot com

23:18they didn't hear the d at the end they said is this the right side am i going to get

23:21the right

23:21place and i'll tell you if you go to big mike fund dot com i promise it's not a kinky

23:26site

23:29that's a that's a good way to just uh make the distinction there um i like how you uh in

23:34your

23:34book it'll forward you to the to the main site uh because i own both domains there you go um

23:41i like

23:41how you how you mentioned or kind of your theme in there is ready ready fire aim because uh really

23:46in

23:46real estate i mean you can read so much you can watch a million podcasts but you're not going to

23:49learn how to actually do real estate until you do real estate um the only way to shortcut that is

23:55to

23:55find a mentor find somebody who's done it and work alongside them um that's really the only way to get

24:01those insider insights insider insights uh in in real estate so um anyways now uh point i just want

24:10to add some add something to this point so having a mentor is critical i agree mentor or coach we

24:15all

24:15need at every stage of life having a mentor or coach it is critical no matter how how well how

24:20good you

24:21get uh you know the best of the best still get uh coach even at the peak of their career

24:28especially

24:28top top top athletes so that mindset is a it is a critical requirement to continue to to learn

24:36but the simple methodology the simple methodology that passive investors can take and active is a

24:42little different people go to mastermind communities i've been in multiple masterminds for years uh to

24:47get better and to learn but the is a passive investor when you write a check into any deal storage

24:54mobile home park industrial open-air shopping anything take the opportunity to be a little more than

25:02just a passive investor collecting checks get the reports read the reports ask questions get involved

25:08understanding what's working and what's not working and why and that will help you get better with the

25:13next decision nice i like it all right well with that i'm going to push us into the quick question

25:19round you ready yeah go ahead let's do it starts with education it could be any form could be a

25:25book

25:26you've read movie you've seen mentorship program you've been a part of anything like that just need

25:30two recommendations one for general life wisdom and then one for real estate

25:34so start with why uh that's a great book really really powerful i'm still on it or something like

25:40that yeah simon uh yeah silly or whatever yeah cynic cynic there we go let's take a little bit to

25:49google you guys will find it yeah this the the book i already mentioned sometimes you win and

25:55sometimes you learn john c maxwell is one of the profound offers uh there's a there's a lot of

26:02fun interesting books i really like this this book uh richer wiser happier uh uh i think offers

26:09last name is green mark green uh phenomenal book really studies the lessons of some of the greatest

26:16investors like howard marx or charlie monger and others so hope it's enough that's that's the three

26:21books that uh some of the recent books i'm a big fan of ray dalio's everything so the principles the

26:28principles of navigating big dot crisis the principles of changing world order very relevant

26:32a lot of people looking at the you know u.s dollar and u.s government printing money are we

26:37running into a crisis all that stuff is so well described by ray dalio yeah yeah his books are i've

26:43only read one the principles one but it's pretty good all right next question is for your younger

26:48self let's go back to the mike who is uh let's go back to the one who is just coming

26:52over to u.s

26:52just getting started go back to him look him in the eye give him one piece of advice moving forward

27:00start earlier investing in real estate so the early you start the better it is real estate seems to

27:05work really well gradually over time uh so don't look for perfection uh you know especially when the

27:15market goes through some kind of correction reset you're buying well but uh even starting early

27:21and just just getting used to it the appreciation over years takes care of the business um i bought

27:27in new york city not really cash flowing market people prefer to buy near where where they are

27:32uh and um i i again start early and learn the way that that's the best advice that i would

27:40give

27:41and uh anytime somebody says that uh we it's in the bucket of i wish i got started sooner

27:46it probably 80 of the guests come on and say that so anytime they do i always point it back

27:51to you the

27:51listener if you have not got started go out there and just get something done it doesn't matter what

27:56it is could be a single family could be a piece of land but just go out there buy something

28:01and get

28:01started because so many people that come on the show wish they got started sooner and it's uh now is

28:06always better than yesterday so um awesome with that we are going to move on to the next question

28:11this is about the u.s it's a big place there is a lot of opportunity out there give me

28:16the single

28:16metro you're most excited about investing in today

28:21wow that's a great question i wish i i had a single metro and unfortunately i i don't have an

28:26answer

28:27some people would give you a wonderful answer of course you have your demographic trends

28:31and people migration trends probably dallas um for the wharf metro uh just because people are moving

28:39from new york and from california but you know you you have to pay attention to what you're buying and

28:46the price you're paying and then the market can get oversupplied as well and so if you're talking

28:51about one metro for a really long-term hold that's a great uh market uh but at the same time

28:58you know deeper value you could find maybe midwest we found some great opportunities i said in you

29:05know detroit area you can do contrarian please so it's not a single market uh i would say there are

29:11many markets um but long-term trends you know texas and florida seem to uh have gotten a lot of

29:18inbound capital migration and people moving there they don't want to pay coastal taxes yeah yeah dfw is a

29:26solid um solid market we have two self-storage facilities out there and they're actually

29:30crushing it um and it's funny you mentioned detroit one of my uh coaching um students is uh that's the

29:37the metro that we're focusing on and i had no idea how cheap houses and multifamily is out in in

29:44that

29:44area the detroit area um i'm from seattle you're from new york i'm sure uh our our understanding of

29:50uh price per door is is a little bit different than what you can expect in those metros so

29:55let me give you one live example we bought 79 000 a door uh last year deep value buy which

30:02used to

30:02trade a 125 a door and uh it's got before any improvements before anything the in-place

30:09transfer 1150 a door that's crazy it's better than the one percent rule i love it all right next

30:17question is about finding deals it all starts getting in contact with the seller and pen in

30:21that purchase agreement so what is your favorite way to generate leads and find new deals

30:27well we do a little different and that's why i will uh not give you the best marketing advice how

30:34to directly find deals we actually play the role of uh we have we run funds we we raise capital

30:41so we

30:42marry money and opportunity so our deal flow does not come from us doing and looking at a thousand

30:48deals and then pinning it down to five that we do we do something different from our perspective

30:55we work with very established long-term relationship uh vertically integrated operators

31:01and different strategies we are capital partner we are super lp in a matter of speaking

31:05so our investors give us a check in our funds or one of your syndications and then we write a

31:12big

31:12check majority of the capital in a given deal so for us the deal flow comes from through the

31:17relationships give you example right before this call i was with a team looking at a uh flex industrial

31:23deal uh in maryland coming from uh one of our sponsors who we've done deals with in the past

31:29and then they source the deals uh uh through their methodologies so our approach is just as a super lp

31:38is to have these wonderful strong sponsors with uh specialty and they bring us deals once they

31:45filter them and filter them and filter them we hear when they're about to put them on the contract

31:50and the phone call we get here's the deal here's all the details would you guys be interested uh to

31:56uh take part in this opportunity this is very different versus you know they got to go look at

32:03the thousand deal the 200 deals and and screen it so i don't have methodology how to get the deals

32:08but i know when i when i see a great deal because they come to us and we look at

32:13small subsets that

32:14we pick and choose from a well pre-vetted uh subset nice i like it all right next question is

32:21about

32:21lessons learned not every deal we get into goes the way we expect it in fact pretty much every time

32:26something's gonna go wrong and that's when we get to learn a lesson so what was a deal that went

32:30a

32:30little bit sideways for you guys and then what was the lesson you pulled from it

32:36ah so many lessons right i mean we talked about cost basis and buying the right market and market

32:41cycles so uh i would say of course mastering market cycle howard marks is a great book uh and the

32:49lessons learned you know if you if you buy at the wrong time because the market is at the peak

32:53hard

32:53to fix it right you just got to get patient but the most fundamental lesson you can have and it's

32:59difficult to to do is um uh overcapitalized projects have have reserves have margin of safety

33:06um and uh the best way to describe it is when you look at any deal

33:19use charlie monger's approach it's kind of funny how how it works but he says always invert

33:26always invert and avoid stupidity this is a funny word these are fundamental things but what the hell

33:31they mean and they mean this look at possibilities of loss first before you look at the upside and

33:37this is what we change the mindset so how do you fix fix your underwriting at the beginning if you

33:44are already in a deal that is not going well not an easy uh thing to fix so the solution

33:52is

33:53overcapitalized conservative leverage how can you lose money right so if you start there then you

34:00figure out what you can do on the upside once you figure out how to protect your downside yeah i

34:06don't

34:06know if that answers the question but we've learned that lesson just have have more more cash cash is the

34:12king both to protect deals and if you have great and create new opportunities access to cash is

34:19incredibly valuable yeah yeah i've you know we've covered that exact lesson many times on the show

34:26how you need to have more capital at the outset than you actually think that you're going to need

34:30i've learned this lesson the hard way myself i know so many people have done it um where you just

34:34you

34:34buy a deal but you just you don't have the capital uh you haven't um raised the capital you haven't

34:40you don't have the capital in the bank to to execute the plan um because things go wrong all the

34:45time

34:45you're never going to know exactly what's going to go wrong you can you know plan to the till you're

34:50blue in the face but um you know life has a way of just making other things go wrong and

34:55so

34:56uh that's when you need that capital in the bank to uh to keep the deal deal going forward um

35:01and

35:01the other uh um point that you made there was you have to buy right and i'm i'm telling you

35:07guys that

35:07is the thing um it doesn't matter what like if a if a deal is out there and a broker

35:13put a price on it

35:14a million dollars whatever that is not the price that is not what the deal is actually worth you

35:19guys offer what you think the deal is worth on most deals that i that i offer on are usually

35:2420

35:2430 lower than the actual asking price because uh brokers their their job is to get the highest

35:31highest penny or highest dollar for that deal and so you need to make your own assumptions make

35:37your own assessment of the deal and offer what you think it's uh it's worth um anyways with that

35:42i'm going to push us on to the very last question this is for the listeners you've given us a

35:46lot

35:46to think about i'm sure people want to reach out get in contact with you is a two-parter where

35:50can

35:50they find you and then what can they expect when they reach out back to the big mike fund dot

35:55com

35:56website right there's a i think there's a way to uh for you to uh sign up for the newsletter

36:01sign up for

36:01the book um and again uh if you're bored you got nothing else to listen to there's still big

36:07mike fund podcast right and sorry for being a little self-promoting but uh we don't do volume

36:14we have great guests and and hopefully gabe you'll come on on the podcast soon we we love to talk

36:19about

36:20all kinds of interesting topics so go on the website you can reach out to the website um not sure

36:25there's a

36:25scheduling link link there but you'll figure it out uh once you uh reach out and beyond that i i

36:32don't

36:33give out my cell phone number i don't take phone calls from strangers uh people figure out how to

36:37reach out uh by the way don't ever send me a deal unless you have a wonderful referral it's kind

36:45of

36:45funny my rule of thumb i never want to hear cold calls called anything we there's no reform my first

36:52question who referred you and if you don't have a strong referral chain i appreciate you i'm not i'm not

36:57a bad guy actually uh love to help people uh but you can reach out and you know if you

37:03need some help

37:04i'm happy to uh to try to uh see if i can do something for you uh then and the

37:11best thing is

37:11figure out who's the right mentor or or coach for you and we all just kind of like back back

37:16to the

37:17basic wisdom uh will i be able to help you maybe uh i do some coaching but very very few

37:23people very

37:23very selective so try to help uh but just do uh and don't let obstacles stop you and if you

37:32fall

37:33down you run into problems you lose money or your deal doesn't go learn and move forward that's that's

37:38the ultimate wisdom awesome i love it all right i will put mike's link in the show notes so if

37:43you

37:43guys want to reach out all you got to do is click the little more in description it's going to

37:47pull

37:47down that full description and in there you can find his links all right man that wraps it up thank

37:53you very much for offering on the show thank you gabe appreciate you and thank you everyone

37:58absolutely for everybody who's with us today thank you guys for showing up you are the reason we do

38:03this so if you guys have any questions reach out to me gabe with the real estate investing club.com

38:07if you guys want to support the show just leave us a review comment anything like that

38:10other than that i hope you guys have a great week keep rocking real estate and i look forward to

38:16seeing you on the next episode

38:17you

38:20you

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